The Center for Western Priorities promotes responsible policies and practices to protect the West

Aug 5, 2016

Bankrupt coal company execs want huge bonuses — but can they clean up after themselves?

This week, Peabody Energy Corporation requested that a bankruptcy judge allow the company to pay nearly $12 million in bonuses to its top five executives. In April 2016, the coal company filed for Chapter 11 bankruptcy protection to restructure its debt as the coal market collapsed.

In court papers, Peabody claimed the bonuses will incentivize its top executives to successfully restructure the company for “the benefit of all the debtors’ stakeholders.” At the same time, however, it’s not clear that Peabody has the financial resources to clean up after itself once it exits bankruptcy.

With mines on public land in Wyoming’s Powder River basin, Peabody Energy has relied on self-bonding to cover future cleanup costs. Rather than paying for a traditional insurance policy through third-party bonds, self-bonding is a promise made by coal operator itself that it will be able to cover the future costs of reclamation. Peabody has $1.2 billion in self-bonds, more than any other U.S. coal producer. Now that Peabody is bankrupt, those promises are in doubt, and taxpayers could be left with the bill for environmental cleanup.

Conservation groups are trying to hold Peabody accountable as it moves to exit bankruptcy. A federal judge recently ruled that the Environmental Law and Policy Center and the Western Organization of Resource Councils (WORC) may sue the Office of Surface Mining Reclamation and Enforcement (OSMRE) for not making sure Peabody has the resources or insurance to cover the costs of reclamation.

On August 4, the Powder River Basin Resource Council and WORC filed a complaint with OSMRE saying the agency had not ensured Peabody has enough bonds for reclamation in Wyoming. The letter states: “Merely because a company is carrying out some level of reclamation work does not mean that company does not have to have sufficient reclamation bonding.” The federal government should demand “sufficient financing… as part of any restructuring efforts in the bankruptcy proceeding.”

Ultimately, a judge will decide how much of Peabody’s money will go to environmental reclamation and how much will go to the demands of creditors. The bankruptcy court put Peabody’s future cleanup costs at $726 million, and a recent deal with Wyoming will guarantee the state only $127 million if Peabody walks away.